Asian markets fluctuate ahead of key earnings, rate cut

Asian investors trod carefully on Tuesday after the latest bounce in optimism fuelled by hopes Federal Reserve boss Jerome Powell will signal an interest rate cut in a highly anticipated speech to top central bankers this week.

With recent data indicating the US economy remains in good shape as inflation slows and the labour market softens, there is widespread expectation the bank will finally start unwinding its long-running programme of tight monetary policy next month.

A slew of earnings from US stores Target, Lowe’s and TJX are also on tap this week, providing more insight into the confidence of consumers after reassuring retail sales figures last week.

But the main focus is Powell’s remarks to the annual symposium of world central bank leaders and financiers at Jackson Hole, Wyoming, which is seen as a possible launchpad for the Fed’s rate-cut cycle.

Bets have surged that officials will cut rates by 25 basis points next month — with some even flagging 50 points — followed by two more before the end of the year.

Powell raised hopes for a move at the bank’s most recent meeting when he said it could come “as soon as” September, having previously said the policy board did not need to wait for inflation to fall to its two per cent target before reducing rates.

“All eyes and ears are tuned in, eagerly waiting to see if he’ll give a wink of confirmation to the current market pricing,” said independent analyst Stephen Innes.

“The market is positioning his remarks to be more consequential than usual, hoping for a dovish signal that sets the stage for the (policy board) to cut in September,” he said in his Dark Side Of The Boom newsletter.

However, he added, “But don’t expect Powell to spill the entire rate-cut enchilada just yet. With one more non-farm payrolls report to navigate, the decision between a 25 or 50 basis point cut in September is still up in the air, poised to be the opening act in a multi-rate-cut storyline.”

Meanwhile, San Francisco Fed chief Mary Daly told the Financial Times she had “more confidence” inflation is being tamed following recent data.

Her colleague at the Minneapolis Fed, Neel Kashkari, said in the Wall Street Journal that the prospect of a weaker labour market made talk of a reduction appropriate.

All three main indexes on Wall Street ended well up, with the S&P putting on one per cent and the Nasdaq 1.4 per cent.

Asian investors were a little more cautious but pushed most markets higher.

Tokyo rallied 1.8 per cent, clawing back all Monday’s losses, while Sydney, Seoul, Singapore, Taipei, Manila, Mumbai, Bangkok and Jakarta were also up.

However, Hong Kong and Shanghai retreated after recent advances, while Wellington also fell.

London dipped in early business but Paris and Frankfurt were both up.

Gold broke to a fresh record above $2,513 Tuesday — a third successive day of new peaks — on Fed rate cut bets that would make the yellow metal more attractive to investors.

Crude prices extended Monday’s plunge on growing hopes for a Gaza ceasefire as US Secretary of State Antony Blinken continues talks with regional leaders.

After meeting Israeli Prime Minister Benjamin Netanyahu, Blinken said Israel has accepted a US “bridging proposal” and pressed Hamas to do the same, having earlier said the talks may be the “last opportunity” for a deal.

US President Joe Biden said last week that an agreement could lead Iran to refrain from launching attacks on Israel in retaliation for the killing of a Hamas leader in Tehran.

In company news, Tokyo-listed 7-Eleven owner Seven&i Holdings dropped more than 10 per cent a day after surging almost 23 per cent on news it had received a takeover bid from Canadian retail giant Alimentation Couche-Tard, the operator of Circle K.

The deal, which could be worth as much as $38.6 billion, would mark one of the biggest foreign acquisitions of a Japanese firm.

However, the Financial Times, citing people briefed on the matter, reported that US and Japanese regulators were likely to scrutinise it closely on worries about the impact on prices and jobs.

– Key figures around 0810 GMT –

Tokyo – Nikkei 225: UP 1.8 per cent at 38,062.92 (close)

Hong Kong – Hang Seng Index: DOWN 0.3 per cent at 17,511.08 (close)

Shanghai – Composite: DOWN 0.9 per cent at 2,866.66 (close)

London – FTSE 100: DOWN 0.4 percent at 8,322.76

Euro/dollar: DOWN at $1.1076 from $1.1086 on Monday

Pound/dollar: UP at $1.2995 from $1.2989

Dollar/yen: UP at 146.67 yen from 146.61 yen

Euro/pound: DOWN at 85.23 pence from 85.33 pence

West Texas Intermediate: DOWN 1.2 per cent at $73.50 per barrel

Brent North Sea Crude: DOWN 1.0 per cent at $76.90 per barrel

New York – Dow: UP 0.6 per cent at 40,896.53 (close)

AFP